With effect from 6 April 2016, the personal savings allowance means that basic rate taxpayers can earn up to £1,000 of interest before paying any income tax, for higher rate taxpayers this is reduced to £500.
However individuals receiving rewards on their current accounts may have a liability to tax as the amounts received are not classed as interest and so are not covered by this allowance.
A reward in the form of cashback on spending is not taxable. The most common current account rewards that could be taxable are those paid by Barclays, Halifax and Co-op.
The rewards paid by Halifax and Co-op are made net of tax meaning that basic rate taxpayers should have no further tax to pay. The payments from Barclays are made gross and so could result in a tax liability for all taxpayers.
For more information, please contact Lesley Sutton on 01484 550037 or email email@example.com.